Budget Deficit Triples

Good day… And a Marvelous Monday to you! And a Happy Easter Monday to those who get the day off! I’m still battling this, whatever it is that I have, which means I spent the weekend in the sick bay… UGH! Oh well, we carry on… But… Talk about short-n-sweet… That’s today’s Pfennig for sure!

The lack of volume on Friday didn’t yield any wild swings, and the currencies pared their losses from the day before (trade deficit plunges)… This morning, the currencies, led by the euro (EUR), are moving higher versus the dollar, but at this point it’s baby steps… The bias to sell dollars hangs over the currencies however. It seems to me that it’s very much like trying to hold a kid back from ripping open their Christmas presents… It sure seems inevitable, but when is the question… As I used to say in my presentations, imagine if you will a big old Ford rambling down an icy country road, and it begins to spin out of control… You know for sure that you’re heading toward that guardrail, and your Ford will make impact with that guardrail… It’s just a matter of time….

Well… Some water and time has passed under the bridge now and traders and investors are dipping their toes back into the risk waters again. The Mayo comments last week, really threw a spanner in the works for the risk takers… But, as I said, time has now passed, and the comments are in the rear view mirror now. With risk back on the menu, the high yielders are the first to get attention… And the Aussie dollar (AUD) is soaring this morning, passing the 72-cent figure this morning… And the Brazilian real (BRL) has really taken some HUGE strides recently… In fact, in the past three months… The real is up over 6% versus the dollar!

And do you know what currency is at the top of the heap with regard to performance versus the dollar this year? That’s right! It’s the real!

Speaking of high yielders… The South African rand (ZAR), which I’ve always said is too volatile for my liking, is the best performer in the past three months… So… With the Aussie dollar, real and rand all percolating… You can see that investors are growing tired of paltry yields, and looking to higher yielding countries. Of course, whenever the cold wet blanket of risk aversion is thrown over the markets, the risk takers head of the hills… But for now they are taking on risk, and that spells “happy times are here again” for the high yielders…

Of course, I laugh out loud whenever I say “high yielder” as if they really have “high yield”… Compared to the majors like the U.S., U.K., Japan, Canada, and even the European Union, these “are” high yields!

OK… Did you read the news this morning, when the paper landed in your yard? China’s currency reserves grew by 16% in the first quarter, versus a year ago… This puts China’s currency reserves at $1.9537 trillion, at the end of March… Hmmm… Makes you wonder, why the rest of the world doesn’t treat China like E.F. Hutton, and listen to them when they complain about stuff, like the safety of its holdings… Yes, China has complained recently about the monetary policies the United States, and how they are trying to keep the economy’s pulse pumping.

Speaking of the monetary policies being used… Friday, the budget deficit printed… And has, right now (which is before a ton of the spending is booked) tripled to $957 billion! That’s in the first six months of the fiscal year… So… Let’s just say, we don’t spend any of the funds already allocated to revive the economy. That would put the annual deficit at almost $2 trillion! And, then… Add in the spending already allocated… Remember, a couple of months ago, I told you that at first I calculated the deficit this year to be $2.5 trillion, but then raised it to over $3 trillion? Well, it sure appears that we as a country are well on the way to a $3 trillion budget deficit this year, which should put our national debt at around $14 trillion dollars!

And… Of course that’s just a drop in the bucket, when you add in all the future payments we will owe on the endowments like Social Security, and Medicare… And, oh, by the way, just where do those war expenses get booked? Is that the proverbial “off balance sheet item”? You bet it is folks…

Oh… I had better stop right there! I can get all “geeked up” whenever I begin talking about our deficits… I begin to wonder, no wait! I said I was going to stop! OK, onward and upward to something else! I’m going to step away for a minute; I’ll be right back…

OK, I’m back! I had to get up and walk around for a minute; that deficit talk just got right under my skin from the get-go! Then you add in the consumer debt, and you just go crazy! Yes, maybe credit card debt is plunging, but mortgage foreclosures are soaring, according to Reuters.

So… Gold, which has had a difficult time pushing back to $900, is up $5 this morning. I was checking the best returns this morning, year-to-date, and I noticed that silver had pushed higher by over 9% so far this year… It’s out performing gold, right now… The real winners this year, so far, are… Platinum and palladium, up 32% and 27% respectively. WOW!

As I said at the top this morning, it’s Easter Monday, which means it’s a holiday in parts of the world, and that means we won’t be “fully staffed” in the markets again today… But the U.S. stock jockeys are back in the saddle, and that should add to the excitement of the day!

Well… Here in the United States, the data cupboard is bare… But the remainder of the week sees it get restocked daily! Tomorrow’s big report will be the retail sales for March which, given the indication of the BHI (Butler Household Index), should be a bit better than recent reports… Wednesday is Tax Day, and we’ll see the stupid CPI, and the TIC reports. Industrial Production and my fave, Capacity Utilization also print on Wednesday. Thursday brings us a slew of data, of which the Weekly Initial Jobless Claims will be the most important. And we finish this week with the U. of Michigan Consumer Confidence report for this month.

So… With me dragging a bit, some countries on holiday, and no data today, I think I’ll head to the Big Finish… Will you join me?

Currencies today 4/13/09: A$ .7245, kiwi .5860, C$ .8165, euro 1.3210, sterling 1.4730, Swiss .8685, rand 9.0550, krone 6.6225, SEK 8.2240, forint 219.20, zloty 3.2910, koruna 20, yen 100.50, sing 1.5250, HKD 7.75, INR 49.87, China 6.8350, pesos 13.11, BRL 2.17, dollar index 85.44, Oil $50.84, Silver $12.51, and Gold… $887.40

That’s it for today… A Big weekend for St. Louis sports teams… Our Blues finally made it back to the playoffs after five years. But that doesn’t tell the whole story. Two months ago they were in last place (15th) and ended the season in 6th place! That’s quite a run! And my beloved Cardinals completed a sweep of the Astros… You should have seen my little granddaughter, Delaney Grace yesterday, all dressed up for Easter… So cute! All the kids were at home yesterday along with other members of the family… A nice day, even if the weather didn’t cooperate! My oldest son, Andrew, is in the process of buying his first home. He’s found a real nice one at a great price! OK… I’m coughing my fool head off, so I’ll hit send and try to get this stopped before people come in… I hope your Monday is Marvelous!

The Daily Reckoning